Monday, February 16, 2009

Confidence & Optimism: Policy

There is a difference between confidence and optimism. Confidence is usually quiet, but your enemies will call you arrogant. Optimism is confidence with enthusiasm, with a tendence to act because the future is expected to be better than today.

For an individual, confidence comes from inner strength - moral values, spiritual enlightenment. Individual optimism comes from the feeling of one's ability to perform well in the coming environment.

For the nation, confidence and optimism is the result of policy. The people feel confident when they know they have a right to belong in the country regardless of the circumstances. The people feel optimistic when they can what they like in the country, within the bounds of the usual individual limitations traded off in any civilised society.

Confidence and optimism becomes an issue in a country when the citizens are differentiated. Like any differentiated product in a market economy, there is a competition for a higher value, based on certain characteristics which the promoters may wish to highlight. When intrinsically homogeneous products, like washing power, are differentiated, the only method of differentiation is branding. This is where promotion and advertising. The differentiation are purely in the minds of those who would benefit from the branding, and they are the politicians. The ordinary men and women which, in this example, are the homogoneous washing power, can only feel bewildered by the sharp differentiation they may been made to realise among themselves that they may even begin to believe in that differentiation in due course. This is treading on dangerous ground.

Sensible governments, as we have seen in the civilised world, have placed great emphasis on the commonness of people. It is this commonness of people that gives rise to the commonwealth of man, a concept I am dismayed that even our more eminent political leaders may have failed to understand. It is the working together of the common people among ourselves that we all share a common future, and depending on what we do and how we do them, a better common future.

One of the greatest failures of the Malaysian economy - and society - is the segregation of the various business communities such that each has short-changed themselves by their failure to open up and trade with each other. This works against the law of economics, and the consequences can only be a degradation in efficiency and competitiveness against the rest of the world.

Strangely, thought not unexpectedly, within such a divided economy, it seems acceptable to bring barbarians within our midst while we refuse to co-operate to work among ourselves. We make a big deal out of the promotion of foreign direct investments, while we are happy to strangle our own home-grown investors through all kinds of economic restrictions.

The result of this misguided policy on investment - the preference of foreign to local - has brought our economy to a hugely mis-structured economy where our graduates are deemed useless. FDIs want to hire cheap and half-thinking individuals so that wages can be kept low. The elite pump primed themselves with construction projects wish hires only illiterate or semi-illiterate. There is no adequate home-grown investment which can only grow through productivity gains and innovation. We are not stuck as a middle-income economy for no reason.

While the deterioration of our education system is a phenomenon to lament - which only the agents of the deterioration can only sing their own phrases - it is not an entirely hopeless situation. Our people, as a result of our diversity, are well-educated in the world outside; where the formal education system may be a near-failure, the world outside the local universities is the school of hard knocks. Some of our chosen geniuses have been knocked down really hard.

The only thing that we all need to learn, including our children, is to have an openness of the mind, so that we can see things as they are for ourselves, rather than believing in what other people may tell us. Learning to think is the only education we need, regardless of the fields of study we or our children may choose to undertake. The ability to think and to acquire knowledge of reality is the very basis for innovation of a better world for all of us.

What is the best form of investment in the current economic crisis? When there are not enough jobs, invest in the education of the people - the first-time job seekers, the retrenched and those how currently clinging onto their jobs. The economy has collapsed because it has gone off-tangent. How to redirect the economy? I won't leave it to the politicians; the politicans should leave it to the people - by providing the preconditions for investment, our own investment.


de minimis said...


This is powerful stuff. There's a lot of wisdom in what you are saying. Good economic policies will instill confidence. Fair economic policies will engender optimism. Politicians should stay out of economic policy-making. But, politicians should, instead, seek a broad-based input from genuine economists and industry groups that are stakeholders in the well-being of the economy.

walla said...

I wish i can share the optimism inasmuch confidence.

The immediate term is somewhat tepid, i think. The four quadrants of msc, biotech, venture-cap and uni-research have not much to show in terms of original development that can be commercialized beyond our shores in the next six months. We used to make some pc security software for instance, overtaken by competition. It's all a short cycle.

In the midterm we can't expect too much from the new pools of brains coming out or back. Back is less likely as the govt has admitted as much. Local output can only be better if the research-oriented people are motivated to devote themselves to low-pay research looking at specific developments.

In the longterm, based on emoting the commonness of our communities, one can float some form of education retooling. Maybe that can be done, starting tomorrow, but who will do it in such a challenging time we are facing today when too many people are just getting by?

People need jobs now and businesses need markets for their products now. Longterm is far away. The govt can give some more incentives for education but how much can they give? One to one for fees? Let's say they do that. Where do the people go and for what type of new skills? Technical drawing, microelectronics, robotics, biofuel tech, pharmachem....what? who has the teaching equipment? where are the experts?

They shouldn't be taught the same skill-sets you have now because if preparing them for longterm local but cutting edge innovation type of work, the technology forecasts must also be prescient. The govt had some agency doing these before; aerospace was one of its areas. Not much till today save for one company.

True, if we don't do, we will always be in the grips of external forces and low on the global food chain. But it's easy to say invest now in building our own human capital for longterm and then see if we can then incubate some industries of our own which can find sweet spots in the emerging markets. But for all the investments, the questions will still have to be answered in the business case now as to how big those markets will be. We can't just sell to ourselves because our market isn't big, and those emerging markets will probably be spoilt for choice because we are late compared to the others which were in the same spot as we are. So it's back to exporting to rich and big markets.

Maybe we need to change the entire notion of what constitutes a country, and by extension, our economy.

just passing by, for what this post is worth.

etheorist said...

de minimis,

Thank you for your support, as ever!

The method of getting economic ideas for short-term stabilisation (as in the 1997 crisis) may not be usable today as the world is undergoing structural adjustment. Some forward thinking is required and this will entail some fundamental reworking of the economic system.

Which brings me to the next point.


Your points are valid.

To add one more point, we all need to stand back and take a broad view.

No doubt jobs are in jeopardy today and hence the urgency to create jobs.

What if all the stimulus packages around the world are unable to engineer a sustainable recovery?

In which case, the long term is not that long and we would wish we had done something on the fundamentals.

Whatever ad hoc stuff we are going to do will be inadequate - like taking a shot in the dark.

But by building confidence among the people in our country and our economy, we may have a fighting chance to survive the new world by digging our toes and feet into the ground and build our own foundation for long-term stay and long-term growth.

If our young people are long-sighted enough, we may not have to define the nation and economy for them; they would do it on their own by the things they do.

The challenge is to build the preconditions for them to have a chance to succeed in the future. This is what I call investment.

de minimis said...

And, thus, begins the Great Conversation. But, in the mean time, we have to wait for Sakmongkol to complete the development of his highly interesting political contributions. I guess we'll have to do with a quorum of three for now.